Stock Market Investment: 5 things investors should do when the market fall

While a stock market crash or market correction is impossible to predict, there are several strategies that investors can use to reduce the impact on their investment portfolio.

Stock Market Investment: 5 things investors should do when the market fall
Diversification protects you from losing all your assets in a market swoon. 

Market crashes and economic downturns are part of life. As the COVID-19 pandemic showed, market calamity can occur seemingly out of nowhere. What’s important is how investors handle that calamity. While a stock market crash or market correction is impossible to predict, there are several strategies that investors can use to reduce the impact on their investment portfolio.

Here are some things you may want to consider during market volatility.

Keep an eye on financial news

The most important thing to remember is that a bear market is only temporary. Before making any investment decision, sit down and examine your entire financial situation, especially if you’ve never created a financial plan before. The first step toward successful investing is determining your goals and risk tolerance, which you can do on your own or with the assistance of a financial professional. Keeping up with financial news will help you predict how long a bear market will last.

Identify good value stocks

Robert Kiyosaki says, “Crashes are the best time to get rich”. Market crashes give the best investment opportunities, so stay tuned with good value stocks. Value stocks are classified as companies currently trading below what they are worth and will thus provide a superior return.

Make an investment strategy

Diversification protects you from losing all your assets in a market swoon. To diversify, you need to have many different kinds of investments. That means you should have some of the following: stocks, bonds, real estate funds, international securities, and cash. Divide your fund into some parts (may be 5 or 10) and invest after some interval (may be one month). It will help you average out your buying.

Stay invested in your long-term portfolio

In the past, stock markets have always had peaks and troughs. It is not only inherent in markets, but it is also a part of their evolution. Remember, this too shall pass, and the markets will recover. While it is critical to remain invested, the quality of the portfolio is most important. During a bear market, most stocks are likely to fall; however, not all will recover. An investor should not sell a holding in which they have made a long-term investment. Some investors sell their holdings in the hope of buying at a lower price later. As we all know, no one can predict the bottom, making it difficult for investors to repurchase their stocks. So, it’s best not to sell them in a falling market.

Keep more weightage on the equity side

Investors should decrease their holding in debt and increase their equity weightage, as buying at a low level always gives the best return in the long term. A stock market crash provides the ideal opportunity to increase your equity allocation at a low cost and to transition from a more conservative asset allocation to a more aggressive one. This is due to the unrivalled ability of equity investments, particularly when purchased at low valuations, to boost your investment returns for long-term goals such as retirement.

(By Ravi Singhal, CEO, GCL Securities Limited)

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